_Lake Raymond Gary Properties_

To preface this post, I should probably state that it's not strictly political in nature.  For those of you who read my blog regularly, you know that I don't often write about politics, and I don't strictly define myself as a Democrat OR a Republican.  However, I do think and hope there's a bit of self-preservation in all of us.  Call it instinct.  This issue I will write about here has the potential to further damage our industry, so I felt compelled to air it for discussion/action.  My ideas are my own, and I don't claim any level of economic expertise other than my business degree and my own experience running a small business since 1996.  Now that we have that out of the way, read on...

Not long ago, President Obama gave his State of the Union address.  At one point, he was talking about regulating the banking industry and the rest of the financial sector.  There was an irony that I saw there, when it occurred to me that in their zeal to do something about the financial mess which they likely helped to create, Congress is now looking at the possibility of passing measures that could further damage the housing and mortgage industries. 

Over-regulation probably won't solve our problems, at least not as I see it.

So, what am I referring to here, anyway?

Well, I had lunch with a good friend of mine not too long ago, and he brought to my attention that a number of Senate Democrats recently sent a letter to the Federal Reserve Chairman, Ben Bernanke (on Christmas Eve, no less), urging him to adopt new regulations which would ban yield spread premiums for mortgage brokers.  The letter was headed up by Sen. Merkley, and it was co-signed by about 18 other Democrats.  To read it yourself, visit https://www.namb.org/images/namb/GovernmentAffairs/Senate%20Letter%20to%20Fed-YSP%2012242009.pdf.  The National Association of Mortgage Brokers has been working overtime to keep their members informed on this.

If you aren't familiar with yield spread premiums, or YSP's, here's one definition from Wikipedia, "the money or rebate paid to a mortgage broker for giving a borrower a higher interest rate on a loan in exchange for lower up front costs."  This means that YSPs can often help to defray costs for buyers.  I won't claim to understand all of the requirements therein, and it won't really matter for the purposes of this post.

I did take some time to read through the actual regulations that they are considering instituting, and some of the language there was disturbing to me:

To address the concerns related to loan originator compensation, 
the Board proposes to prohibit payments to loan originators that are 
based on the loan's terms and conditions. This prohibition would not 
apply to payments that consumers make directly to loan originators. 

The Board solicits comment on an alternative that would allow loan 
originators to receive payments that are based on the principal loan 
amount, which is a common practice today. 

If a consumer directly pays the loan originator, the proposal would prohibit the loan originator 
from also receiving compensation from any other party in connection 
with that transaction.

Since the Board is soliciting comment on this, I would be happy to oblige. 

Why does this proposal bother me as a real estate broker?

Well, it seems to me that this hinders the free enterprise system as it exists now.  By removing YSPs completely, you will effectively remove yet another viable option for consumers who are short on cash.  Over the past few years, we've all watched helplessly as mortgage options for Joe Average have dwindled.  Truthfully, the loan approval process was too loose before.  I get that, believe me.  There were people who got approved for loans who were truly risky propositions.  However, I've seen the pendulum swing too far in the other direction now.  I have told many friends and potential clients that roughly 1/2 of the marketplace was vaporized with the tightening of the credit markets and tougher loan guidelines. For every 10 home buyers that I could assist before, I now have 5 or 6.  I hear the same thing from my colleagues across the country.

The subprime mortgage crisis was certainly part of the problem, and it did seem like all you really needed was the ability to fog a mirror and you could buy a home.  That being said, the removal of subprime, most zero-down programs, stated-income loan products for self-employed individuals has made being a Realtor or a mortgage broker a very tough job indeed. 

None of us could ever have foreseen how different our world could become in a couple of short years.  Fear has replaced reason when it comes to the world of banking.  Melodramatic?  Not really.  I am trying to feed a family of six with my income.  Thankfully, I've survived some difficult years, and, along with most people I speak with these days, I am hoping to see a sincere turnaround.  This proposal won't help.

Another concern that I saw in the language is that this lays the groundwork for the government to step into the real estate arena as well, perhaps prohibiting OUR commission from being tied to the sales price of a property.  Again, I see this as inhibiting the free market. 

On the surface, I see how this could be perceived as helping consumers, but the more likely scenario is that mortgage brokers will now have two paths to choose from:

• Charge a lot more directly to consumers to originate loans, since they can't get paid by banks, or
• Go out of business

Clearly, neither of these outcomes would be beneficial for any of us.

In fairness, there are some other parts of the proposal that make sense to me, mainly with regard to consumer disclosures, but this portion would be foolish.  You can see the whole thing here if you're interested:  http://edocket.access.gpo.gov/2009/E9-18119.htm

It's my understanding that the Federal Reserve already has the authority to monitor and regulate mortgage brokers, so any legislative action would be overkill and probably just plain unnecessary.

From my own research, I was happy to see that this issue wasn't split strictly along party lines, unlike so many other things we hear about from Washington.  Although none of the Republicans on the Senate Banking Committee signed the letter, I was pleasantly surprised to find that a handful of Democrats also abstained.  Kudos to Johnson of South Dakota, Benett of Colorado, and Tester of Montana for not just toeing the party line here. I applaud the members of the committee who didn't sign this pressure letter.  You can see a list of all the members here: http://en.wikipedia.org/wiki/United_States_Senate_Committee_on_Banking,_Housing,_and_Urban_Affairs

I'm hoping that the highly paid lobbyists for the financial institutions that actually caused the problem don't manage to shift the blame to the little guys.  While there were certainly predatory lenders that played a part in creating the mortgage crisis, most of these people are just business owners who are trying to provide an honest service and get paid for their work.

If this bothers you as much as it does me, I would encourage you to contact the members of the committee and let them know, especially if any of them are in your home state.

I welcome your input. :)

If you enjoyed this post, why not connect with me elsewhere?

                 

If you're looking for a home in the Austin area, you can visit my primary Austin real estate website at www.austintexashomes.com.  Thanks!

Pricing is both an art and a science. In order to correctly price the house, there is a mathematical formula for market evaluation. It is science. Most buyers and sellers part ways where you should "list" the house at. That is art. Throughout this article, let's assume that the property has a fair market value of $250,000.

For sellers, they list their house at $259,000 to $275,000 - giving it "room for negotiation".

In comes the buyer who clearly seen a variety of homes that range from $225,000 to $275,000 for their intended target purchase of something closer to the $250,000.

Put your Buyer's cap on. Your home (at FMV $250K) is priced at $269K. When comparing the homes the buyers have seen, it is fairly clear that your property has similar features to those around the $250K range. However,  you were asking $269K. Then, when the buyers compare the $260K - $275K homes, yours clearly lack some key features for homes priced in that range. The floorplan is different, the overall appearance and feel for the home just doesn't justify anything over $250K.

The buyers hesitate to put in an offer for fear of making you, the Seller feel insulted with the offer. Since there are so many more "correctly" priced home out there, they just move on to giving a fair price to the seller who ask for it. The negotiation process went well and everyone felt they won.

On the other hand, all you wanted was $250K too. But you padded "room for negotiation" that prevented the buyers from submitting an offer to you.

Hence, you sit on the market a little longer and you inconvenienced yourself just a while longer - all for room for negotiation and all you wanted was a fair market price for your home.

There is a psychological game to play in pricing. As for my pricing style, I don't pad any room for negotiation. That gives you the best value for your home. In fact, if you want to give yourself a sure-win (pricing for motivation), price it slightly below the market value to make it exceptionally attractive. You will sell your home in 2 weeks instead of 2 months.

Pricing is very personal, especially for a seller. This is where the value of an experienced agent comes in - to help guide you in the direction you want to go.

 

 

Loreena Yeo and 3:16 team REALTY employ the Systematic Market Approach to Home Selling in the greater Frisco TX areas. We have successfully sold every single home we listed today, except for one. The homeowner who became very ill decided not to sell his house until his health gets better. Read satisfied client testimonials of the Systematic Market Approach Home Marketing plan.

 

Related Articles:

• Pricing Motivation into Home Prices
• My Secrets to Selling in 30 days
• Not all agents are created equal. Hence your bottom line is not equal.
• When Sold is the Only Acceptable Outcome
• What Every Seller Needs to Know about Home Selling These Days

 

 

 

 

*********************************************************************************************

All contents are original. Consider subscribing to my blog for more real estate commentaries.

Subscribe via Email if you are not an Active Rain member here.

 

Contact:

Loreena Yeo
Frisco TX Realtor® / Broker of 3:16 team REALTY
(214) 783-2210
loreena@loreenayeo.com

Check out my Frisco TX Homes website.
The premier greater Frisco TX Homes local informational center for your one-stop real estate needs.

Search MLS Listings with no registration required.
Home Value Request

 

Super-serving Frisco, Plano, Dallas, McKinney, Allen, Little Elm, Prosper, Celina, Richardson, Dallas M-Streets,
Dallas White Rock Lake area communities and other surrounding areas.

Copyright © 2010 by Loreena Yeo (3:16 team REALTY).
Originally Posted on Psychology of Home Pricing

Pricing is both an art and a science. In order to correctly price the house, there is a mathematical formula for market evaluation. It is science. Most buyers and sellers part ways where you should "list" the house at. That is art. Throughout this article, let's assume that the property has a fair market value of $250,000.

For sellers, they list their house at $259,000 to $275,000 - giving it "room for negotiation".

In comes the buyer who clearly seen a variety of homes that range from $225,000 to $275,000 for their intended target purchase of something closer to the $250,000.

Put your Buyer's cap on. Your home (at FMV $250K) is priced at $269K. When comparing the homes the buyers have seen, it is fairly clear that your property has similar features to those around the $250K range. However,  you were asking $269K. Then, when the buyers compare the $260K - $275K homes, yours clearly lack some key features for homes priced in that range. The floorplan is different, the overall appearance and feel for the home just doesn't justify anything over $250K.

The buyers hesitate to put in an offer for fear of making you, the Seller feel insulted with the offer. Since there are so many more "correctly" priced home out there, they just move on to giving a fair price to the seller who ask for it. The negotiation process went well and everyone felt they won.

On the other hand, all you wanted was $250K too. But you padded "room for negotiation" that prevented the buyers from submitting an offer to you.

Hence, you sit on the market a little longer and you inconvenienced yourself just a while longer - all for room for negotiation and all you wanted was a fair market price for your home.

There is a psychological game to play in pricing. As for my pricing style, I don't pad any room for negotiation. That gives you the best value for your home. In fact, if you want to give yourself a sure-win (pricing for motivation), price it slightly below the market value to make it exceptionally attractive. You will sell your home in 2 weeks instead of 2 months.

Pricing is very personal, especially for a seller. This is where the value of an experienced agent comes in - to help guide you in the direction you want to go.

 

 

Loreena Yeo and 3:16 team REALTY employ the Systematic Market Approach to Home Selling in the greater Frisco TX areas. We have successfully sold every single home we listed today, except for one. The homeowner who became very ill decided not to sell his house until his health gets better. Read satisfied client testimonials of the Systematic Market Approach Home Marketing plan.

 

Related Articles:

• Pricing Motivation into Home Prices
• My Secrets to Selling in 30 days
• Not all agents are created equal. Hence your bottom line is not equal.
• When Sold is the Only Acceptable Outcome
• What Every Seller Needs to Know about Home Selling These Days

 

 

 

 

*********************************************************************************************

All contents are original. Consider subscribing to my blog for more real estate commentaries.

Subscribe via Email if you are not an Active Rain member here.

 

Contact:

Loreena Yeo
Frisco TX Realtor® / Broker of 3:16 team REALTY
(214) 783-2210
loreena@loreenayeo.com

Check out my Frisco TX Homes website.
The premier greater Frisco TX Homes local informational center for your one-stop real estate needs.

Search MLS Listings with no registration required.
Home Value Request

 

Super-serving Frisco, Plano, Dallas, McKinney, Allen, Little Elm, Prosper, Celina, Richardson, Dallas M-Streets,
Dallas White Rock Lake area communities and other surrounding areas.

Copyright © 2010 by Loreena Yeo (3:16 team REALTY).
Originally Posted on Psychology of Home Pricing

What about an ARM?  Adjustable Rate Mortgage, Benefits and Warnings.

In an earlier post I highlighted the difference between the high risk loans of a couple of years ago, the part they played in the housing and financial meltdown and the benefits of today's ARM products.  In this post I'd like to focus on the proper application of these products.  Anyone who doesn't understand all of the possible scenarios should not take out this type of loan.  If the language or terms are confusing or too complicated, please use a loan you understand and are comfortable with. 

Now, why would anyone seriously consider an Adjustable Rate Mortgage (ARM)?  ARMs generally come with a 5 or 7 year fixed rate and payment, after which both may adjust for the remaining term.  These are called 5/1 & 7/1 ARMs.  During the fixed period your rate and payment are set just as on a 30 year fixed mortgage.  If the borrower has strong reason to believe they will be moving within this initial period, these products should be seriously considered.  How seriously depends on how certain they are of the future change.  

Note rates currently as low as 3.5% for a 5/1 ARM translate into a significant monthly savings for the borrower.  They also translate into greater borrowing power, enabling the purchase of a more expensive home. 

Here is an example.  I posted a fantastic 30 year fixed rate today of 4.625% (4.757% APR).  On a purchase of $500,000 with 20% down your Principle & Interest Payment would be $2056.56.  The same scenario on a 5/1 ARM at 3.5% (3.583% APR) principle & interest payment would be $1790.22.  This would be a monthly savings of $266.31, or over 5 years a savings of $15,798.60. 

For someone who will be moving or making other changes in that time or even shortly thereafter, this product should be available and recommended.  Historically the average American moves every 7 years, or so I've been told.  Chances are people with no clear plans may also benefit, but with around 5% fixed rate money available, why take the chance. 

If you understand that after the fixed period ends your rate will likely increase substantially and you are reasonably certain that your housing needs will be changing at or near the fixed term of the loan, and you are comfortable with the risk/reward offset, then consider an ARM.  If not, you still have incredible rates available and should take full advantage of the historically low rates. 

As a lender, my only goal is to provide options to my clients and allow them to make the best decisions for their needs.  I receive no greater compensation for one product over another. 

What are your hesitations regarding an ARM?  What applications do you see for this product now that it is back on the market and priced attractively? 

Did you like this post?  Do you know someone else who might?  Do you know anyone who might benefit from our services?  Please pass this along to family or friends or contact us, we love to help.

Dan Tabit       206-310-8629    425-868-SOLD(7653)  DanTabit@Northstone.net

One stop Real Estate & Mortgage Services Serving Sammamish, Issaquah, Redmond, Bellevue, Mercer Island and the greater Seattle area.   WA LO License #39789

I have a confession to make...I've got a thing about staging Laundry Rooms. The Kitchen may be the "heart of the home" but many hours are spent each week in the laundry room. And THAT makes this room a very important space to feature when selling your home.

Many times when I am consulting with homeowners and we get close to the laundry area, they'll ask if I want to see it because after all, it's only the laundry room. In their minds, it's that space that's a catch-all for dirty clothes, shoes, coats, 5 cases of water bottles, dog food and old paint cans. Oh yes! I tell my clients, I DEFINETLY want to see what's behind that door.

The Laundry Room needs some attention and staging too. This is one space you don't want to forget about! The biggest issue is getting rid of everything that is not needed so the room can breathe and look spacious. Yes...that means you have to get rid of the 20 pairs of shoes on the shoe rack behind the door, the dog food has to find a new home and you're going to have to store all that water neatly in the garage.

(Image: Hampton Designs)

Here's a few Staging Tips that can help you transform your laundry room into a fabulous space that buyer's will love:

• DECLUTTER: Get everything out that you don't need. The only thing that should be in there is the stuff you need to do laundry...(detergent, softener, etc.) Now is not the time to buy the HUGE 50 gallon jug of detergent. I'll tell you why in a minute.

• CLEAN LIKE CRAZY: Wipe down that washer and dryer from top to bottom. Push it back against the wall if needed. I've seen a lot of washer and dryers pushed out with all those hoses showing. Tuck the hoses in while you're at it. Think NEAT and ORGANIZED.

• PAINT. Most laundry rooms need a fresh coat of paint and a different color. For some reason, I see alot of sponge painting in these spaces. Probably because it was a "safe" room to try your hand at the technique years ago. I'm speaking from personal experience here and mine looked just dreadful! Trust me, a fresh coat of paint goes a long way.

• STAGE: Canvas Bins and Baskets make a HUGE DIFFERENCE visually when used to store all those detergents. Buyers do not want to see all those bottles that look like clutter anyways. It looks so much more organized and fresh staged with these pretty bins or baskets. This is why you don't want to hit Cosco for the jumbo size detergents. I want you to hide it in the bins.

• KEEP UP THE LAUNDRY: Not letting the laundry get out of hand during selling can be a challenge. We lead busy lives. Doing a load a day keeps you on top of the process. Buyers should NEVER see dirty clothes in piles, in a basket, anywhere. Ever. The same goes for clean laundry. It should not be sitting out on the counter or top of the dryer waiting to be put away or hanging around. Buyers don't want to see your laundry. They want to see the space. Show them an organized room they can emotionally connect to. Not how much work laundry can be.

• HANGERS & CLOTHES BASKETS: Yes...we need them to do laundry but during showings, they should not be anywhere in sight. Storing all those extra hangers on the clothes rack is not an option either. Throw them in one of the bins/baskets or if you are lucky to have a closet in your laundry room, store them there.

• HIDE IT: And one last mention here. If you have a last minute showing or you are just REALLY behind on laundry because you didn't listen to my "one load a day" advice, make sure you get it out of sight and HIDE those baskets. When I sold our house a few years back, I would actually take those baskets of dirty laundry and hide them on the garage shelves during a last minute showing. (They were concealed well and no one ever knew!) I have also been known to take it with me in the car. Hiding it in the actual washer or dryer is good too. For those that have always kept your laundry up, stop laughing. The rest of you know what I'm talking about and it's a great strategy to use.

Here's a few examples of past clients that followed my advice and created FABULOUS Laundry Rooms:

Ready to prepare your home for the Spring selling season? We're ready to help you and look forward to your call!

Happy Staging!

Teresa Meyer is the Owner and Lead Staging Designer at Stage a Star, Cincinnati's Premiere Real Estate Staging company located in Cincinnati, Ohio. Teresa is an ASP, Accredited Staging Professional and CSPE, Certified Staging Professional Elite and Ohio Certified CSPE Trainer to real estate professionals in Cincinnati. She is a member of RESA, Real Estate Staging Association and currently is the State of Ohio RESA President.   Teresa can be reached at 513-379-5488 or by email: teresameyer@fuse.net to answer your questions about the staging process and looks forward to assisting you in preparing and staging your house for the Cincinnati real estate market.

JOIN OUR FAN PAGE for exclusive coupons, tips, ideas and our latest staging projects here in Cincinnati!

Stage A Star provides home staging services to Hamilton county Ohio, Butler county Ohio, Warren County, Ohio, Clermont county Ohio, West Chester, OH., Liberty Twp, OH., Mason, OH., Fairfield Twp., OH., Monroe, OH., Hyde Park, OH., Loveland, OH., Maineville, OH., Morrow, OH., Deer Park, OH., Indian Hill, OH., and surrounding Cincinnati and Northern Kentucky areas.

 

I have a confession to make...I've got a thing about staging Laundry Rooms. The Kitchen may be the "heart of the home" but many hours are spent each week in the laundry room. And THAT makes this room a very important space to feature when selling your home.

Many times when I am consulting with homeowners and we get close to the laundry area, they'll ask if I want to see it because after all, it's only the laundry room. In their minds, it's that space that's a catch-all for dirty clothes, shoes, coats, 5 cases of water bottles, dog food and old paint cans. Oh yes! I tell my clients, I DEFINETLY want to see what's behind that door.

The Laundry Room needs some attention and staging too. This is one space you don't want to forget about! The biggest issue is getting rid of everything that is not needed so the room can breathe and look spacious. Yes...that means you have to get rid of the 20 pairs of shoes on the shoe rack behind the door, the dog food has to find a new home and you're going to have to store all that water neatly in the garage.

(Image: Hampton Designs)

Here's a few Staging Tips that can help you transform your laundry room into a fabulous space that buyer's will love:

• DECLUTTER: Get everything out that you don't need. The only thing that should be in there is the stuff you need to do laundry...(detergent, softener, etc.) Now is not the time to buy the HUGE 50 gallon jug of detergent. I'll tell you why in a minute.

• CLEAN LIKE CRAZY: Wipe down that washer and dryer from top to bottom. Push it back against the wall if needed. I've seen a lot of washer and dryers pushed out with all those hoses showing. Tuck the hoses in while you're at it. Think NEAT and ORGANIZED.

• PAINT. Most laundry rooms need a fresh coat of paint and a different color. For some reason, I see alot of sponge painting in these spaces. Probably because it was a "safe" room to try your hand at the technique years ago. I'm speaking from personal experience here and mine looked just dreadful! Trust me, a fresh coat of paint goes a long way.

• STAGE: Canvas Bins and Baskets make a HUGE DIFFERENCE visually when used to store all those detergents. Buyers do not want to see all those bottles that look like clutter anyways. It looks so much more organized and fresh staged with these pretty bins or baskets. This is why you don't want to hit Cosco for the jumbo size detergents. I want you to hide it in the bins.

• KEEP UP THE LAUNDRY: Not letting the laundry get out of hand during selling can be a challenge. We lead busy lives. Doing a load a day keeps you on top of the process. Buyers should NEVER see dirty clothes in piles, in a basket, anywhere. Ever. The same goes for clean laundry. It should not be sitting out on the counter or top of the dryer waiting to be put away or hanging around. Buyers don't want to see your laundry. They want to see the space. Show them an organized room they can emotionally connect to. Not how much work laundry can be.

• HANGERS & CLOTHES BASKETS: Yes...we need them to do laundry but during showings, they should not be anywhere in sight. Storing all those extra hangers on the clothes rack is not an option either. Throw them in one of the bins/baskets or if you are lucky to have a closet in your laundry room, store them there.

• HIDE IT: And one last mention here. If you have a last minute showing or you are just REALLY behind on laundry because you didn't listen to my "one load a day" advice, make sure you get it out of sight and HIDE those baskets. When I sold our house a few years back, I would actually take those baskets of dirty laundry and hide them on the garage shelves during a last minute showing. (They were concealed well and no one ever knew!) I have also been known to take it with me in the car. Hiding it in the actual washer or dryer is good too. For those that have always kept your laundry up, stop laughing. The rest of you know what I'm talking about and it's a great strategy to use.

Here's a few examples of past clients that followed my advice and created FABULOUS Laundry Rooms:

Ready to prepare your home for the Spring selling season? We're ready to help you and look forward to your call!

Happy Staging!

Teresa Meyer is the Owner and Lead Staging Designer at Stage a Star, Cincinnati's Premiere Real Estate Staging company located in Cincinnati, Ohio. Teresa is an ASP, Accredited Staging Professional and CSPE, Certified Staging Professional Elite and Ohio Certified CSPE Trainer to real estate professionals in Cincinnati. She is a member of RESA, Real Estate Staging Association and currently is the State of Ohio RESA President.   Teresa can be reached at 513-379-5488 or by email: teresameyer@fuse.net to answer your questions about the staging process and looks forward to assisting you in preparing and staging your house for the Cincinnati real estate market.

JOIN OUR FAN PAGE for exclusive coupons, tips, ideas and our latest staging projects here in Cincinnati!

Stage A Star provides home staging services to Hamilton county Ohio, Butler county Ohio, Warren County, Ohio, Clermont county Ohio, West Chester, OH., Liberty Twp, OH., Mason, OH., Fairfield Twp., OH., Monroe, OH., Hyde Park, OH., Loveland, OH., Maineville, OH., Morrow, OH., Deer Park, OH., Indian Hill, OH., and surrounding Cincinnati and Northern Kentucky areas.

 

 

 

FHA Loan rumors now become a reality – So what happened?

 

Wow... I just talked about some rumors that have been floating around for months about FHA loans. Let me make something clear. They are rumors to me until they are officially stated through HUD/FHA. And on that note, they are also rumors when you read blogs that actually state that they happened already, when it was still in discussion. Here is what I said yesterday.

FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

In our ever changing world of mortgages in the last several years, FHA made a few changes that were announced today, but there is no concern to panic, at least in my opinion. You can read it directly on HUD's web site.

FHA Announces Policy Changes to Address Risk and Strengthen Finances

 

 

 

 

*** The FHA Loan changes as of January 20, 2010 ***

 

So what are some of the major changes or possible changes in the near future and what impact could they have on the average homebuyer? (4 changes below)

 

• FHA Upfront Mortgage Insurance Premium - Known as UFMIP - This is what gets added to your loan amount after your down payment is subtracted from your purchase price or your base loan amount of what you are refinancing. The old amount was 1.75% for purchases and refinances and 1.50% for all FHA streamline refinances. It will now be raised to 2.25%. HUD is also requesting that Congress increase the annual premium, which is your monthly mortgage insurance. Currently it is .55% and .50%, depending on your LTV position. This change will not take place until the spring. (more on this below)

Example of the UPMIP change - Sure, it will hurt some, but that extra 1/2% on the total does not change the payment as much as you think it does. On a $300,000 loan, you are talking about an additional $1,500. This equates to an additional $8 per month.- Not much to disqualify someone, depending on how high their debt-to-income ratio was initially pushed.

 

• FHA credit score and downpayment changes - As mentioned yesterday, FHA mortgages never had a FICO score (credit score) number. It still doesn't and here is where the rumors went wrong.  FHA has raised their credit score requirement for 3.5% downpayments to 580. Previously, you needed to have a credit score of 500 or higher. I will talk about this difference in change tomorrow in Part 2. This change will not take place until early summer.
  

• Reduction in allowable seller concession from 6% to 3% seller help -  Just basic mathematics... the buyer won't be able to get more than 3% from the seller to pay for their closing costs and pre-paids. This change will not take place until early summer.

 

• More awareness of FHA lenders perfromances - Basically giving the public more information and more access to this information. This can be found in # 4 under the new policy changes. New FHA policy changes

 

 

 

 

So why the changes and what do they do to you, the borrower?

 

As many of you know, HUD has been suffering major losses within their mortgage insurance pool. HUD just insures these loans. This is the money that is collected from the UPMIP and the annual monthly mortgage insurance (MMI). Here is some food for thought. HUD states this. "This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing."

 

FHA gets the Upfront Mortgage Insurance Premium (UPMIP) from the lender very quickly after the loan closes. This is upfront cash. But they want to shift some of this weight to the monthly mortgage insurance, claiming that it will reduce the total monies to the borrower. It is hard to argue this until we know what number they want to increase the monthly fee to. Once I know what the new percentage is, I will write a blog in regards to this shift to the MMI that in my opinion is smoke and mirrors. I will explain more in that blog.

 

Why change the credit scores to include a higher downpayment if you have a score below 580?  This basically allows FHA to balance its risk, yet still give anyone the chance to obtain a FHA mortgage. But keep in mind, they would need 10% down. I will be talking about this in part 2, giving you a better understanding of how hard these types of loans will be to obtain and why.

 

Lastly, lowering the seller concession from 6% to 3%. This has been a long standing discussion that appraisal values were raised to cover the additional expenses to the borrower, allowing the seller to pay for them. This effort also tries to keep those agreement of sale contracts from changing to a higher purchase price, just to cover such costs as mentioned above.

 

 

Keep in mind, there will be a new FHA mortgagee letter that will be out officially tomorrow, giving more detail.....and that this is not 100% official until the mortgagee letter is published. And as mentioned, the next step for HUD is to get congress to act on increasing the annual monthly mortgage insurance, which is known as MMI.

 

 

 

Important Reminder – be very careful of what articles you read about FHA loans. Several articles came out late yesterday, before HUD posted their own information. I have already read one article that was missing 1 of the 4 changes. And one article was giving bad opinion and advice, in my opinion, based on their lack of knowledge and experience in the mortgage industry. Keep in mind, they are just journalists trying to get some sort of news to the public as soon as. The new mortgagee letter will be out tomorrow. – 1/21/10

 

 

FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

FHA Loans Rumor Alerts - You don't need 10% or 20% down & more about credit scores - Part 2 of 2

 

 

 

 

                    

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Maybe you shouldn't buy a home.  Yep, I said it.  Even though I'm in the business to "sell" homes, some people shouldn't really buy a home now, or possibly ever. Renting may be a better option for some. Believe me, I'd much rather have a happy client than someone who regrets making the decision to buy.  

So, maybe you think you want to buy a home.  But make sure it's the right thing to do for you.  Here are SIX things to think about:  

1. Buying for the tax credit.  Isn't it great that you can get a tax credit just for buying a home? Sure it's a great motivator (I wish it was there when I bought, as do thousands and thousands of other home owners), but it shouldn't be the sole reason to buy a home.  There are so many other reasons.  Ask yourself whether you still want to buy a home if you miss out on the credit. If you don't, you probably don't want to buy one anyway.  

2. Can only afford a fixer but cant fix it. With many bank owned or distressed sales there is inventory available, often with major repairs needed.  Just because you can afford the sales price doesn't mean you can afford the repairs.  Before jumping into a "fixer," make sure you have the money, or resources, available to fix it.  Otherwise, don't buy it.  

3. It's "time." Reached a certain age? Got married?  Had a baby?  There are many life milestones where we are "supposed" to buy a home.  Before jumping into home ownership, make sure that it's because you want to buy a home and not because of external or societal pressures.  

4. You make enough to pay monthly bills, but that's it.  If you live paycheck to paycheck you probably want more financial security before buying a home. Home ownership involves much more than making your monthly mortgage payment.  There are always unforeseen expenses, plus if your income is reduced or lost, and you don't have extra funds set aside, you could also become a foreclosure statistic.  

5. Not motivated to maintain or pay someone to maintain your home.  When you rent it's so easy to call your landlord to deal with a home issue.  Once you buy it can be shocking to realize you have no one to look to except yourself.  YOU will be solely responsible for your home.  Even if you live in a condo complex, you will have things that you have to take care of.  And you have to do it or pay someone to do it. If this isn't appealing it probably is better to rent.  

6. See it only as an investment.  Before the market changed many buyers bought so they could make a bunch of money as prices went higher.  Didn't work out so well for some.  Before then people bought homes with the intention of living in them as their home for a long time and not necessarily as an investment.  Times have changed and people buy and sell every few years, so of course, home ownership and what it means changed too.  Unless you're really an investor, however, buying only to increase your net worth may not serve you well.    

Deborah Engel, Prudential California Realty, is a recognized San Diego and Carmel Valley Realtor for top client satisfaction.  If you'd like to learn more about Deborah, visit her website, www.PropertyByDeb.com, email her, Deb@PropertyByDeb.com, or call her at 858-829-1989.